MercoPress. South Atlantic News Agency

Argentine Central Bank takes action to keep exchange rate under control

“The increase is not in the dollar, the increase is in the blue (unofficial) dollar,” Cerruti said

Argentina's Central Bank (BCRA) Thursday ordered banking institutions nationwide not to increase their holdings in foreign currency until the end of the month, amid a market pressure on the exchange rate.

During the usual Central Bank board meeting like every other Thursday, the directors took notice of the growing pressure on the exchange rate as the Nov. 14 mid-term elections loom over and decided to take action by mandating financial entities to maintain their global position in foreign currency until the end of the month at the same level as the monthly average of daily balances registered in October or the one in force until Nov. 4, whichever was lower.

The goal was that banks do not make any movement with these funds, which in part are reserve requirements already within the Central and recorded as such by the BCRA.

Also to contain market pressure, the Central Bank had to sell another USD 80 million Thursday, for a total USD 230 million disbursement this week.

The BCRA's reserves have been falling sharply as a result of daily interventions to keep the US dollar from soaring.

Thursday's decision was also made in view of the greater seasonal demand from importers with a lower presence of normal exporters at this time of year, aggravated by an ongoing strike at the Rosario port, according to Central Bank sources quoted by Buenos Aires media.

The BCRA seeks avoid having a greater demand in the currency exchange market so as to allocate the foreign currency already existing solely to imports.

Meanwhile, the US dollar traded on unofficial markets Thursday above an unprecedented rate of AR $ 200. In this politically inconvenient scenario, the government focused on consumer prices.

Presidential spokeswoman Gabriela Cerruti insisted “the increase is not in the dollar, the increase is in the blue (unofficial) dollar, a market that is managed with its own rules and their own expectations.“

She also maintained the rise was ”not influencing the macroeconomic situation.”